Encumbrance
National Real Estate Exam glossary · National Real Estate Exam
Definition
Any claim, lien, charge, or restriction held by a party other than the owner that affects the title or use of property. Encumbrances divide into those affecting title and the right to transfer (liens) and those affecting the physical use of the land (easements, encroachments, restrictions).
Encumbrance in plain English
An encumbrance is any claim or restriction on a property that belongs to someone other than the owner and limits what the owner can freely do. It doesn't mean you don't own the place — it means there's a string attached, like an unpaid debt tied to the property (a lien) or a rule about how the land can be used (an easement or restriction). Think of owning a car that still has a loan on it, plus a rule that your friend gets to park in the driveway: you own it, but not with total freedom. Encumbrances come in two flavors — ones that affect your ability to sell/clear the title, and ones that affect how the land itself can physically be used.
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